Japan’s Nikkei Stock Average Falls as US Credit Downgrade Spurs Asset Jitters, Lifts Yen (UPDATE 1)

Reuters

12:53 JST, May 19, 2025 (updated at 16:00 JST)

TOKYO, May 19 (Reuters) – Japan’s Nikkei share average fell on Monday after Moody’s downgrade of the U.S. government credit rating raised concerns about a potential flight from U.S. assets, leading to a stronger yen.

The Nikkei index ended 0.68% lower at 37,498.63. The broader Topix inched down 0.08% to 2,738.39.

“The market is cautious about the impact of the Moody’s downgrade of the United States. They are worried this could drive a sell-off of U.S. assets,” said Shuutarou Yasuda, a market analyst at Tokai Tokyo Intelligence Laboratory.

“The timing of the downgrade was bad. It came at a time now when domestic stock markets recouped losses from (U.S. President Donald) Trump’s tariff announcement,” he said.

Moody’s downgraded the U.S. sovereign credit rating on Friday due to concerns about the nation’s growing, $36 trillion debt pile, in a move that could complicate Trump’s efforts to cut taxes and send ripples through global markets.

U.S. assets saw a sell-off last month following Trump’s decision on April 2 to slap sweeping tariffs on trading partners, including key strategic allies such as Japan.

“If U.S. dollars are sold, that would push the yen higher, which is bad for Japanese exporters,” said Shoichi Arisawa, general manager of the investment research department at IwaiCosmo Securities.

The yen strengthened 0.4% to 145.05 in Asian trade on Monday.

A stronger yen typically weighs on exporter shares by reducing the value of overseas earnings when converted back into Japanese currency.

Chip-related Advantest and Tokyo Electron lost 2.85% and 1.7%, respectively.

Drugmaker Daiichi Sankyo jumped 7%, topping the Nikkei’s percentage gainers and providing the index’s biggest boost.

Of more than 1,600 stocks trading on the Tokyo Stock Exchange’s prime market, 50% of the stocks rose and 45% fell, and 3% ended flat.